Alarm at health fund exodus

Insurers want to be able to offer discount premiums to young people and are calling for $800
million in cuts to overpriced medical devices like hip and knee replacements.Claudia Baxter

by Sue Dunlevy

TWO million Australians plan to dump or downgrade their health cover ahead of premium rises three times the inflation rate that take effect next month.

It will accelerate the dangerous health fund membership spiral which started last year that threatens the long term viability of the health insurance industry.

And it puts the government under even more pressure to reform the industry in the budget to put a brake on a decade of premium rises many times the inflation rate.

Insurers want to be able to offer discount premiums to young people and are calling for $800million in cuts to overpriced medical devices like hip and knee replacements.

The government is also examining the practice of state governments cajoling people to use their private insurance in public hospitals, a practice that is adding $200 a year to premiums. The April 1 rise will push up the average price of family cover by $200 to over $4200 and the cost for singles will increase by $100 to around to $2000.

At the same time the government will cut the tax rebate for health insurance by $50.

Health Minister Greg Hunt says the average premium rise of 4.84% is the lowest in a decade but members of some health funds are bracing for premium rises almost double that.

Members of Health.com.au Pty Ltd will face an average rise of 8.53%, Health Insurance Fund of Australia will raise premiums by an average 7.99%, members of BUPA's top hospital cover will see premiums rise by 7.5% and the Queensland Teachers' Union Health fund by 7.3%.

Nearly eight in 10 health fund members will reconsider their insurance ahead of the premium rise according to Galaxy research conducted for health fund comparison business iSelect.

Two million Australians said they plan to plan to downgrade or cancel their policy.

Of these 600,000 Australians are planning to cancel their policy altogether.

One million are looking to downgrade to a cheaper policy with fewer benefits.

A further 400,000 intend to move from a combined policy to hospital or extras only.

More than 10,000 people have already quit health cover in recent months as the high cost of health insurance burns a hole in household budgets.

From a peak of 47.4% of the population in June 2015 health fund membership fell to just 46.6% in December.

When young and healthy people dump their cover it leaves older and sicker people in health funds who are more likely to make expensive claims.

In a bid to reverse the decline health funds have asked the government in their pre-budget submission for permission to introduce a lifetime health cover discount (LHCD) for those who take up insurance between the years of 18 and 30. The discount would be 2% per year for those aged under 30, up to a maximum of 10%.